Anybody who believes ~30% of the workforce was functionally unemployed in 1999 does not know what those words mean, or was not an adult in 1999.
I get what they are trying to convey, but the stronger message is the more straightforward: there are too many jobs that do not pay enough to live on.
For me the true problem which most countries dont even acknowledge is low wealth and capital gains tax. Salaries are not enough because of land prices and the prices inflation it causes through out the economy. You bring down price of home land rent then price of everything else comes down. And their is a lot more economic activity as trillions of dollars are not parked in real estate for wealth generation.
I have had this sneaking suspicion for years now that most of the money needs to be locked up because if we actually gave it to the masses to spend we'd see massive inflation and/or environmental catastrophe (worse than the current one). I don't mean to defend the wealth gap, and I'm not trying to make a statement on how things should be. I just think there may be an unfortunate reality that we need most of the world to have less because we can't currently support a middle class globe.
this is already happening via asset price inflation.
where i live (Seattle) small businesses are trapped in a death spiral as their rents are going up, the wages they have to pay are up to even attract workers who also need to pay rent, but purchasing power has not caught up.
Oh, that’s an interesting thought. Nice way to increase GDP without doing anything actually useful, right?
>"we need most of the world to have less"
Hi Elon
A land value tax would fix rich people parking money in real estate. A wealth tax or capital gains tax would not.
A wealth tax would also be beneficial in reducing wasteful stock buybacks. Without any benefits from high stock prices, boards and shareholders will be less inclined to impose those price targets on CEOs, CEOs will be less incentivised to "cheat" on quarter-based performance and the myopic share price performance view of their companies, hence will reduce stock buybacks and returning money to shareholders. That leaves very few options - either reinvest into the company or pay out dividends, and the latter is unfavorable for shareholders compared to the former.
i did recently see something interesting where if you look at buybacks from the Mag7, they basically almost entirely offset vesting employee RSUs. which kind of makes sense, those RSUs have to come from somewhere or they dilute the current shares.
i don't know that people on this website in particular would like the "solution" to that.
Why do you think a wealth tax would reduce stock buybacks? I don't see the relation.
better off taxing people that own more than 1 property and leave people just trying to live alone.
I'd like to see both an automatically adjusting dynamic tax on owning more than one property in the same municipal or arbitrarily useful region, as well as dynamically banning the ownership of more than one. Everytime I mention this, I get "blah blah we have a democracy blah blah freedom" etc.. but it's no such a democracy if one particular age-range dor demographic of people owns all the assets and politically protects them from diminishing in value or facing competition. Pending presumably complex implementation details, but a healthy system that prevents generational fiefdoms would probably adjust to severely disincentivise even the possibility of acquiring more than one of the most important finite resources in urban areas.
If a land value tax would fix rich people from parking money in real estate, it would price regular people out of real estate.
I know LVT is the libertarian dream, but in practice it means only the rich can own real estate long-term, in most cities. It also means the rich can drive out the poor by driving up land values around them, to the point where the taxes are too much to afford.
LVT simply wouldn't be a good system, if applied in the real world.
Well, I (and most economists) disagree.
I think you just have a misunderstanding of how taxes work. The person or company that "pays" the tax does not bear the full burden of the tax. That burden is usually widely distributed throughout the economy. In the example of LVT, a landlord would pass on the LVT in the form of increased rents to their tenants. A power company that pays a carbon tax charge more their electricity. An income tax makes it more expensive to give people jobs, so even if the earner pays it, that burden is also bore by the unemployed. Whoever pays the tax, they just pass it on to the rest of the economy.
But that's ok, because taxes can be paired with other methods like cash transfers or social programs that can effectively redistribute wealth. We should try to raise taxes with methods that have good side effects (LVT, carbon taxes), and then redistribute as necessary.
You may be confusing LVT with property transfer tax? LVT is a tax on ownership of land - driving down land value, not up.
In practice it disincentivises investment in land (rent-seeking and speculative land hoarding) while incentivising land development. In cities this manifests as more, cheaper, homes, and lower rents, and is highly progressive.
I say in practice because we have over a century of explicit and implicit LVT implementations in the real world to demonstrate this. Most implementations of LVT have gone down as described. Estonia is a pretty fantastic case study - 90% of property is owner-occupier! And you might find this new study of implicit LVT in the US interesting - LVT correlates with higher earnings and demographic diversity: https://www.sciencedirect.com/science/article/pii/S004727272...
The challenges for LVT are really about how to transition the tax in for areas that are occupied, but severely underdeveloped. If a low-density inner-city area ought to be high-density, the owners are being charged accordingly. Long term, it stimulates development and the new housing surplus (splitting the tax burden of LVT across a much greater number of owners) balances things out. But that's no consolation to the people being told they have to pay tax on their backyard as if it's already a block of flats.
What if a first owned property is not taxed, but additional properties are?
LVT can be deferred to the time of sale.
Wealthy people would never sell their houses. Keep them in the family or rent them out.
Anyone who had to move for a job or wanted to downsize their house for retirement years would be screwed, though.
Unfortunately that doesn't really help. It has the effect of eroding the asset value such that it quickly means the owner can't sell.
In other words, if selling removes much of your capital, you then don't gave capital to spend on the next place.
Conversely investors become even more motivated not to ever sell. They can defer the LVT forever, and just use the property as collateral for loans (ie getting liquidity without selling.)
And LVT just becomes an expense built into the cost of rent. The investor never pays it anyway, the tenant ultimately pays it.
How will they use it as collateral if it has no value upon sale?
Similarly, why would the next place be expensive if it couldn't be used as a speculative asset?
The tennant pays now anyway. Of a landlord could charge more rent they would.
Two identical properties, one under mortgage and one that isn’t, have identical rental prices. The costs to the landlord are irrelevant.
Income from capital has a low tax rate in the US (and many other countries) because you can deduct neither losses due to inflation nor losses due to risk, both of which are substantial for capital income but non-existent for wage income. The lower tax rate is simpler than actually accounting for these differences.
Treating wage and capital income equivalently would require recognizing losses due to inflation and risk that simply don’t exist in a meaningful way for wage income. Taxing them similarly without very negative consequences requires recognizing these differences in some fashion.
Taxing wealth has myriad additional problems. In the US, about 2/3 of wealth is completely non-liquid so any theoretical valuation is fiction and highly leveraged.
>Treating wage and capital income equivalently would require recognizing losses due to inflation and risk that simply don’t exist in a meaningful way for wage income.
Learning that their wage income makes them immune to inflation and is risk-free seems like it may be surprising news to many Americans.
Is there a country that has implemented these ideas and where the results have been like you expected?
Is capital gains / wealth tax a fix here though? Definitely not saying it doesn't work, I have no idea. But I'd be curious to hear both sides of the argument.
> You bring down price of home land rent then price of everything else comes down
If any price for any reason goes down, that money ends up in housing. The only way to bring down housing pricing is to build more housing. This is extremely well documented.
I feel like the inflation of everything except wages will eventually show up in housing prices. People pay so much for existence, there’s not the same budget for housing. There’s only so much people can afford and also there’s now been a long track record of young generations having stunted starts.
Also not sure how the supply will be affected by boomers exiting the market. I know there will be no surge in supply, but I’m not certain there’s enough buyers at the prices they would expect. If that’s the case, supply will build and prices will drop.
Or you tax it. Or, more correctly, you remove the current protections that allow land to appreciate tax-free for decades. That would move capital out of land and free it for other uses. The current system was designed to put money/people into houses post WWII but has gone too far in promoting radical multi-generational wealth structures.
We already assess property each year for purposes of local property taxes. Treating a 10% rise in value as taxable income each year would shake up the real estate market. Speculative gentrification would certainly stop. And those sitting on empty houses would either sell or try to find renters.
I agree, but taxing real estate as an investment would break the wealth structure of many voters (and politicians) above the 80th percentile of wealth. For half a century, in France, it's been told that real estate was the safest/best investment for households; everyone was passively peer pressured each year, whatever the macroeconomic situation at the moment, to buy. This is a Ponzi scheme, so even the middle class households that recently bought their own shitty flat in Paris will never vote for such a tax because their overpriced asset would lose value and it's often their only lifelong investment.
The same fear will happen if you just target investors owning multiple real estate with this tax, or simply forbid by law from owning several flats in high demand areas. The right wing would scream that the hard working French guy won't be able to invest his hard won money, but the very rich foreigners from Saudi Arabia or investments funds from USA will find a loophole thanks to their infinite money and buy all the french real estate.
Hell, most people in my country are against inheritance tax despite a huge part of them not rich enough to pay it, meanwhile inequalities are rising because of inherited wealth. So taxing the land won't happen, the bourgeoisie has been too effective in its propaganda.
> I agree, but taxing real estate as an investment would break the wealth structure of many voters (and politicians) above the 80th percentile of wealth
Most places do tax real estate. I was surprised to look it up and find that Paris has some of the lowest property tax rates in the world.
Land Value Tax would be a little different, though. It's a proposal to replace most or all taxes with a simple tax on the estimated value of the land. One of the key features of LVT is that if land becomes valuable over time, the tax on that land becomes so high that the owner is forced to sell it. The idea is that the LVT ensures optimal usage of the land by forcing people who own land in valuable areas to use it for a business. So if you buy a house and the area becomes popular 10 years later, your tax bill might get so high that you have to sell it to a developer who will build a high-rise on it, or a grocery store that can afford the high tax rate.
It would never be accepted in practice when everyone's 70 year old parents were being forced to sell their modest forever homes. There's also a major problem where the structures aren't considered at all, so one person with a $2 million home living next to someone with a $200,000 100-year old home would pay the same tax rate if they're on the same size lot, because it only cares about the value of the land.
I don't know why Land Value Tax has become the default solution to everything on the internet, because I think most people would actually hate what it did to society. Having progressive taxes that scale with people's income, spending, and size of their home is good for making the tax burden proportional to wealth and consumption. Replacing it all with a tax that just taxes how much your property is worth ignores everything except the value of your land, which is completely out of your control over several decades of life as the world changes around you.
> there are too many jobs that do not pay enough to live on.
I know this is argued as a reason for high unemployment on the internet, but it does not match my experience in the real world at all. Having a job that pays a little is more income than no job at all. People stuck with low paying jobs often have multiple jobs as a result.
Many jobs require additional expenses: car, commute, babysitting, living in expensive city, no insurance for work related injuries...
So "not enough to live on" often means, it does not even pay job related expenses! Employees are subsidizing their employers!
My partner had a good job offer, but is at home! Buying extra car, petrol, child care... We would loose 150euro a month...
Just because the job doesn’t pay your expenses doesn’t mean someone else out there won’t take it and be happy they have it.
You seem to be confused about the point people are making. The point is that from about 1945 until around 2000 in the USA there really wasn't such a thing as "a job that doesn't pay enough to live on".
People owned houses and cars by working at grocery stores. A single income from any white collar job supported a stay-at-home spouse. Teenagers bought cars by working part time. College kids paid their tuition and living expenses for the full year by working summers.
That today's below-poverty-line job still leaves someone better off than being completely destitute is beside the point.
I understand that argument, but what does it have to do with the unemployment rate?
You seem to be confused about the point I'm making, which is that low-paying jobs drive people to take on more employment, not less.
But "employment" is tracked as a binary, not as a "number of jobs someone is working".
So if person A takes 3 jobs just to get by, there are fewer jobs left for person B. (Not quite 2 jobs less, because it's not perfectly zero-sum, but generally at least 1 job less.)
So while I certainly wouldn't make the claim strongly, as I don't have any data, it would at least make sense for the lack of living-wage jobs to increase unemployment rates.
You're just cherry-picking though. Things were massively different in 1945 in tons of ways. For example Jim Crow was still active for one. Food prices were MASSIVELY higher for another.
Soo was it more or less than that? Don’t leave us hanging like that!
Significantly less. Wanted a job? Walk through any neighborhood being built with a tape measure in your pocket. You'd have a job doing something before you made it past the 4th house. Had a car? Delivering food paid enough to afford a modest apartment.
This could also easily be measured via what is declared in taxes.
> there are too many jobs that do not pay enough to live on.
That may be the case in the US, but not so in other countries.
For example in Australia minimum wage is $26.44/hr. But If you don’t have a job, you can get between $740 and $1047 every two weeks as welfare, forever.
Employers know this. Employees know this. So a job has to pay decently more than that or else nobody will do it.
One really nice economic factor of the dole is that it disappears at a rate of 50c for each $1 of earnings above $150 and at 60c above $256, so there's no welfare cliff.
This does mean that you're effectively only earning 40c for every $1 you earn in that middle band, but that's still less of a disincentive than just taking the whole payment away above a certain threshold.
> So a job has to pay decently more than that or else nobody will do it.
Yeah, though the problem in the U.S. is we have a constant influx of workers perfectly happy to serve as scabs, and no mainstream political party is willing to address the problem in any meaningful way.
Turns out supply and demand also applies to labor, and artificially restricting the supply increases the demand for your own labor, allowing you to live a better life at the expense of large corporations having to pay more for salaries than executive bonuses. Whoda thunk.
Sounds like more at the expense of immigrants than companies? Scabs? What is this, the 1950s?
Can you explain what you're saying? Do you mean that in 1999 fewer people worked low paying jobs?
That data is in the article, "true unemployment" was higher in 1999. The last few years are the best years on the graph.
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